By Savyata Mishra
(Reuters) -Kraft Heinz slashed its organic sales forecast for 2024 on Wednesday after missing quarterly revenue estimates, signaling that it expects higher prices of its snacks and ready-to-eat meal kits to pressure demand for the rest of the year.
Packaged food companies such as Kraft Heinz, Conagra and Mondelez are facing a pushback from consumers after roughly double-digit price hikes over the last year dampened appetite in the key markets of North America and Europe, particularly for lower-income groups.
Shares of the Jell-O maker were up 2% before the bell, as it reaffirmed its annual profit forecast on steady margins.
Adjusted gross profit margin rose 210 basis points, to 35.5% in the second quarter owing to savings made from Kraft Heinz’s investments in supply-chain and automation efforts. That helped it beat adjusted earnings-per-share estimates. It logged a profit of 78 cents per share, above analysts’ estimate of 74 cents per share.
“KHC results played out similar to what we’d expect to hear from others, which is building productivity… and modest inflation being used to lean into greater promotional and trade spend, to try to drive a better volume outcome,” Barclays analyst Andrew Lazar said.
The company said it “will selectively increase investments in promotions” and drive product innovation in its North America retail business.
Bigger rivals PepsiCo and Coca-Cola have also ramped up investments in product innovations and are offering different price tiers to attract value-seeking consumers.
“Consumer sentiment remains cautious,” CEO Carlos Abrams-Rivera said and indicated “a more gradual top-line improvement” in the back half of the year.
Overall volumes fell 3.4 percentage points in the quarter, while prices rose 1.0 percentage point across its portfolio.
It posted net sales of $6.48 billion, missing analysts’ average estimate of $6.55 billion, according to LSEG data.
The Heinz ketchup maker now expects fiscal year 2024 organic net sales to be flat-to-down 2%, from its prior forecast of flat-to-2% growth.
(Reporting by Savyata Mishra in Bengaluru; Editing by Pooja Desai)
